MfBs shun N60b micro insurance market

Despite its N60 billion potentials, microfinance banks (MfBs) are not showing interest in micro-finance insurance (MfI), it has been learnt.

Last year, the National Insurance Commission (NAICOM) unveiled plans to exploit the MfI potentials using the MfBs.

According to operators, the inability of underwriters to have well-defined and simple products may mar the success of the initiative.

Managing Director, LAPO Microfinance Bank Limited, Mr Godwin Ehigiamusoe, said some operators were sceptical about the terms and conditions of various products offered by insurance firms and may not be obliged to patronise them.

Ehigiamusoe said the products were too complex, adding that they are too high for a sub-sector that is struggling to make profit.

Insurance firms, he said, had not done enough to convince the banks on the need to buy into the initiative.

He said the insurers need to be providing innovative products and services before they can be accepted by the banks, advising them to work out plans on how to insure credit risks in the banks. He said the importance of micro insurance to the poor cannot be underestimated, stressing that they need it more than the rich people.

Ehigiamusoe said: “The poor need insurance services than even the rich people. While a financially comfortable person can access medical care, the poor cannot and in the long run, may die from preventable services if he/she does not have a policy.”

Managing Director Sapida Microfinance Bank, Mr Lukman Oyebamiji, said micro insurance scheme is a welcome development for the sub-sector, if properly structured and administered.

Oyebamiji said if the initiative is well-administered, Mfbs will reduce cases of loan defaults generate more money.

He urged insurers to come up with products that are simple and affordable to microfinance clients to make the scheme work.

Similarly, the Chairman, National Association of Microfinance Banks (NAMBs), Mr Olufemi Babajide, appealed to underwriting firms to extend the services to the grassroots where microfinance clients reside to deepen the insurance market.

Babajide said a well simplified and affordable product is what insurance firms need to make the scheme work, stressing that anything short of this would not augur well for the industry.

He said the decision of insurance companies to continue to focus on the lucrative sectors only will affect penetration and the purpose for which the micro insurance initiative was mooted.

“For instance, we always give loans to poor people and if their businesses suffer mishap, it will affect their repayment flow, hence making loan recovery difficult. But with micro insurance, we are rest assured that our money is safe because if our customers suffer fire-outbreak, theft, among other risks, the underwriting firm is there to compensate them and as a result, they can repay their loans,” he said.